Credit Control

6. Chasing Debts

The phone is the most effective debt-collection tool of all.

If payments are overdue, chase them on the phone. Be firm - but not hostile.

6.1 Telephone any late payers after a week to ask the reason for the delay.

• Keep a written record of all your calls.
• Send reminders to anyone you do not call.
• If a customer has a fixed or weekly or monthly payment date, call again just before that date.

6.2 Cultivate a contact in the accounts-payable office.

• Speak to him or her personally and be thoroughly reasonable, but persistent.

6.3 If a customer makes an excuse, ask when you can expect to be paid.

• Suggest a payment on account and stress that you need cash too to pay your suppliers.
• If cheques are 'in the post', ask customers to check the relevant payment records. Then ask for the cheque numbers.

6.4 If you cannot get through on the phone, try different times of the day.

• Do not accept 'I'll call you back.'
• If the amount is large enough, arrange to call to collect the cheque - and be prepared to wait.

6.5 If you are still making no progress, consider employing a debt-collection agency.

• The commission charged is usually 8 to 10 per cent for commercial debts. Charges for consumer collections vary more, between three per cent and 15 per cent. Unlike solicitors' costs, these charges are not usually reclaimable from the debtor.
• Collection agencies should be registered with the Office of Fair Trading and, ideally, belong to the Credit Services Association.

6.6 If legal action seems likely, send a letter of claim. This begins the legal process.

• The letter says that you plan to sue if overdue bills are not settled by a fixed date (usually 10 days away).
• Write this yourself. You do not need to pay a solicitor to do it.

6.7 After this, you may take legal action.

• You may make a small claim at a county court for any amount up to £5,000. You will pay a small fee (£20 to £200) and you should be able to represent yourself. For large claims, seek legal advice.